Clinigen Group Plc, Re [2022] EWHC 990 (Ch) (31 March 2022)

Neutral Citation Number: [2022] EWHC 990 (Ch) CR-2021-002125 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES CHANCERY DIVISION IN THE MATTER OF THE COMPANIES ACT 2006 Rolls Building Fetter Lane London, EC4A 1NL Thursday, 31 March 2022 B e f o r e : MRS JUSTICE JOANNA SMITH ____________________ CLINIGEN GROUP Plc ____________________ MR A. THORNTON QC (instructed by Ashurst LLP) appeared on behalf of Clinigen Group Plc. ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © MRS JUSTICE JOANNA SMITH: This is an application on behalf of Clinigen Group Plc (" the Company ") pursuant to Part 26 of the Companies Act 2006 seeking the sanction of the court to a scheme of arrangement (" the Scheme ") between the company and the holders of its ordinary shares of one penny each (" the Scheme Shareholders "). The Company is a global pharmaceutical services and products company focussed on providing ethical access to medicines. It has a single class of ordinary shares in issue which are admitted to trading on AIM. The purpose of the Scheme is to effect an acquisition of the entire issued and to be issued share capital of the Company by Triley Bidco Limited (" Bidco "), a company established for the purposes of the Scheme by several funds managed by Triton Investment Management Limited (" Triton "), a leading European private equity investment firm. A number of funds advised by StepStone Group LP (" StepStone ") are participating in the acquisition as passive co-investors through one of the Triton funds. Bidco will become bound by the Scheme and has provided the necessary undertaking to the court today through Mr Thornton QC to that effect. For every Scheme share held at the Scheme record time and transferred to Bidco under the Scheme, a Scheme Shareholder will receive 925 pence in cash. The Scheme was originally recommended at a price of 883 pence per share but, on 17 January 2022, Triton and the Company jointly announced an increase in the consideration to 925 pence per share. The Scheme values the entire issued and to be issued ordinary share capital of the Company at approximately £1.3 billion and the consideration payable to the Scheme Shareholders pursuant to the Scheme represents a premium of over 48 per cent to the ex-dividend closing price at which the Company's shares were trading on AIM on 1 December 2021 (the last business day prior to commencement of the offer period relating to the approach by Triton). As the Scheme is a transfer scheme and does not involve any reduction of capital, there is no adverse impact on the interests of the Company's creditors. I have received a comprehensive and very helpful skeleton argument from Mr Thornton QC together with oral submissions today, for which I am most grateful. No one else has attended court today with a view to making any representations. None of the Company, Bidco or their respective advisers has received notice of any objections to the Scheme or of any stakeholder in the Company proposing to attend the sanction hearing today. I have read the Scheme, the Supplementary Scheme Document, the chairman's letter and the Explanatory Statement together with the chairman's report of the court meeting. The Scheme was the subject of a unanimous recommendation from the directors of the Company who were advised on its financial terms by RBC Europe Limited (trading as RBC Capital Markets) and Numis Securities Limited. I have also read: (1) Two statements of the Company's chairman, Elmar Josef Schnee, the first in support of the application for permission to convene a meeting, the second in support of the claim form issued by the Company on 14 December 2021 seeking the sanction of the court to the Scheme dated 20 December 2021. (2) Two witness statements from Lisa Graham of Equiniti explaining the operation of the various registers maintained by Equiniti containing the names and registered addresses of every shareholder and their nominees and the arrangements made for this data to be sent for printing and mailing. (3) A statement from James Dixon as to the steps taken to print and mail relevant documents to shareholders and their nominees. On 17 December 2021, ICC Judge Prentis gave the Company permission to convene a meeting of Scheme Shareholders for the purposes of considering and, if thought fit, approving the Scheme. The order provided for a hybrid meeting with shareholders entitled to attend both physically and via a virtual meeting platform. The court meeting was originally due to be held on 18 January 2022 but, in light of the increased offer from Bidco announced on 17 January 2022, it was postponed and a supplementary circular was sent out on 21 January 2022. The court meeting then took place on 8 February 2022 followed immediately by a general meeting of the Company. The Scheme, as amended to change the price, was approved by a majority of those voting in person or by proxy, representing over 75 per cent in value of those voting. 175 of the 198 Scheme Shareholders (holding 89,454,658 Scheme Shares) who participated in the court meeting voted in favour of the Scheme. 40 Scheme Shareholders voted against the Scheme, holding 8,473,774 Scheme Shares. A majority of 81.4 per cent in number, representing 91.35 per cent in value of the holders of Scheme Shares present and voting at the meeting in person, remotely via the platform or by proxy, therefore voted in favour of the resolution. Of the 847 Scheme Shareholders holding 133,366,726 Scheme Shares entitled to vote at the court meeting, 25.38 per cent in number voted, a relatively strong turnout as Mr Thornton tells me, and the votes cast represented 73.43 per cent of Scheme Shares. Turning to the jurisdictional requirements, (1) I am satisfied that the Scheme amounts to a compromise or arrangement as required by s. 895(1) of the Companies Act 2006 in the sense that there is the necessary element of "give and take" between the Company and its members. Clause 4(d) of the Scheme imposes an obligation on the Company to register the share transfers provided for by clauses 1(a) and 1(b) of the Scheme. That obligation ensures that the Scheme is an arrangement (see Re Jelf Group PLC [2015] EWHC 3857 (Ch) per Mann J at [5]-[6]). (2) Before ICC Judge Prentis, there were no issues as to class composition or otherwise. Paragraph 6 of the Practice Direction was not engaged. There are no issues as to class constitution before me. All Scheme Shareholders are being offered the same deal under the terms of the Scheme. (3) The Scheme document contains the elements required by Part 26 of the Companies Act 2006. (4) The Explanatory Statement was properly circulated and included relevant disclosure, including as to the interests of the directors. (5) The notice requirements provided for in the order of ICC Judge Prentis have been complied with in convening the court meeting. (6) The court meeting satisfied the requirement for a coming-together at a physical venue and via a virtual meeting platform. (7) The Scheme was approved at the court meeting by a strong majority on the representative turnout. Some Scheme Shareholders cast votes both for and against the Scheme. Those Shareholders were treated as both a member in favour and a member against the Scheme for the purposes of the majority in number test in accordance with the principle in Re Equitable Life Assurance Society (No. 1) [2002] BCC 319 . In his skeleton argument, Mr Thornton referred me to the relevant legal principles as to the approach to take to the exercise of my discretion in determining whether to sanction the Scheme. In particular, he referred me to the well-known passage in Buckley on the Companies Acts at paragraph 219 together with the authority of Re TDG Plc [2009] 1 BCLC 445 per Morgan J at [29]-[30] where the learned judge summarised the four key matters that require attention when the court is considering whether to sanction any proposed scheme of arrangement. I note that in addition to setting out those matters Morgan J also made it clear at [30] that: "The court does not act as a rubber stamp simply to pass without question the view of the majority but, equally, if the four matters I have referred to are all demonstrated, the court should show reluctance to differ from the views of the majority and should certainly be slow to differ from the views of the majority on matters such as what an intelligent, honest person might reasonably think." Having regard to each of the four matters identified by Morgan J, I am satisfied that the relevant requirements for the exercise of my discretion are met in this case. Taking each in turn, (1) Have the provisions of the statute been complied with? I am satisfied that they have for the reasons that I have already given. (2) Was there fair representation at the meeting? I am satisfied that the class of shareholders who were the subject of the court meeting was fairly represented by those who attended the meeting. There is no evidence on which I could find that the statutory majority was acting other than bona fide or coercing the minority in order to promote interests adverse to those of the class. (3) Is the scheme one that an intelligent and honest person, a member of the class concerned and acting in respect of his own interests, might rightly approve? I am satisfied that it is and in particular for the following reasons: a. The Scheme was unanimously recommended by the directors of the Company, as I have said, who had the benefit of professional advice. The detailed reasoning for their recommendation was set out in the chairman's letter. b. The Scheme was fully and properly explained to the Scheme Shareholders in the Scheme document and Supplementary Circular. c. The Scheme was approved by a strong majority of the Scheme Shareholders at the court meeting. d. No one has appeared before me today to suggest otherwise. (4) Are there any blots on the scheme? I have not found any blots, which I understand to be technical or legal defects on the Scheme and none has been drawn to my attention. For the sake of completeness, I note that Mr Thornton drew my attention during the course of the hearing to the fact that irrevocable undertakings were provided to Bidco by the directors of the Company holding 0.27 per cent of the Scheme Shares, a very low number of such undertakings. I am satisfied that those irrevocable undertakings did not give rise to a class issue in circumstances where the givers of those undertakings did not receive any additional consideration (see Re Telewest Communications Plc ( No 1) [2004] EWHC 924 (Ch) per David Richards J at [52] to [55]). Mr Thornton has confirmed at this hearing that there are no outstanding conditions. No other issues have been drawn to my attention. In all the circumstances and upon the undertaking of Bidco to be bound by the Scheme, provided by Mr Thornton, together with an undertaking to establish what is effectively a trust account for missing shareholders, I am prepared to make an order in the terms sought, sanctioning the Scheme as approved by the shareholders. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII